Shopify Stock Plunges After Q1 Print As Sale Of Logistics Business Weigh

Shopify Inc SHOP stock plunged after it reported its quarterly results Wednesday.

The company clocked fiscal first-quarter 2024 revenue growth of 23% year-over-year to $1.86 billion, which beat the consensus estimate of $1.845 billion. Revenue grew by 29% Y/Y after adjusting for the sale of its logistics businesses.

The e-commerce platform company reported adjusted EPS of $0.20, which beat analyst estimates of $0.17. The company reported a loss of $(273) million after a profit of $68 million a year ago.

Gross merchandise volume increased 23% year-over-year to $60.9 billion. Gross payments volume came in at $36.2 billion. Merchant solutions revenue increased 20% year-over-year to $1.4 billion. 

The gross margin for the quarter was 51.4% compared to 47.5% a year ago.

Free cash flow totaled $232 million in the quarter compared to $86 million in the same quarter last year. 

Shopify’s shares have faced challenges this year, with the company forecasting higher-than-expected operating costs for this quarter. 

Shopify is grappling with an uncertain economic climate and subdued consumer spending. Additionally, the sale of its logistics business to Flexport has impacted its financial results. The company has seen a slowdown in revenue growth, reporting a 23% increase in the first three months of this year, down from an average growth rate of 26% over the previous four quarters, Bloomberg reports. 

The report further mentioned that Shopify tried reassuring investors, saying that the increased marketing expenditures would pay off within 18 months.

In an effort to revitalize its business and recover from a late-pandemic downturn, the company laid off more than 2,000 employees in May last year, marking its second major workforce reduction in ten months. 

Q2 Outlook: Shopify expects revenue growth of high-teens percentage rate on a Y/Y basis versus a $2.03 billion consensus.

The company expects the gross margin to decrease by 50 bps sequentially. It projects a free cash flow margin to be similar sequentially. 

SHOP Price Action: Shopify shares traded lower by 20% at $61.65 at last check Wednesday.

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